Defence & Aerospace Industry International Cooperation and Export Current Analysis Report Published

Date: Issue 97 - January 2020

Under the auspices of the Presidency of Defence Industries and in cooperation with the Defence and Aerospace Industry Exporters' Association, the “Defence and Aerospace Industry Global Strategies Conference” was held in Antalya between November 30 - December 1 2019 with the participation of President of Defence Industries Prof. İsmail DEMİR, President of Defence and Aerospace Industry Exporters' Association Latif Aral ALİŞ, and senior representatives of defence industry companies. During the two-day conference, panels were held on issues such as international marketing and foreign policy in the field of defence, and various workshops were held for the strategies to be developed.

The Defence and Aerospace Industry Global Strategies Conference was organized in Ankara to develop strategies in line with 2023 targets for the defence and aerospace industry, which is one of the most strategic sectors for Turkey’s economy and exports. At the conference, the Defence and Aerospace Industry International Cooperation and Export Current Analysis Report was also published for the first time.  The report was prepared as a result of the studies and investigations carried out with the 27 leading companies in exports between October 2018 - March 2019.  In the report it was noted that the USA, Germany, Italy, Spain, France, England, and Azerbaijan were listed among Turkey’s top 20 export destinations. According to the report, exports to the U.S. are around US$500-700 million annually, and exports to the United Arab Emirates and Saudi Arabia have declined significantly in recent years. Exports of aircraft and helicopter structural parts and engine components in the civil aviation sector constitutes approximately half of the export figures.

Prof. İsmail DEMİR: “Turkey ranks 14th on the global defence industry export rankings and 13th on import rankings”

Taking the floor at the conference President of Defence Industries Prof. İsmail DEMİR said, “Total defence spending on a global scale is $ 1.8 trillion. Turkey ranks 14th on the global defence industry export rankings and 13th on import rankings. The defence and aerospace industry has the highest export potential among all the sectors in Turkey. The aviation industry has the most significant share in the defence exports. Our export target for 2023 is US$10.2 billion. To reach this figure, the current situation needs to be supported by incentives, credit mechanisms, and intergovernmental negotiations. We need to look at international cooperation and marketing more strategically to increase our exports.” Underlining that the domestic and national products of the Turkish defence industry are highly capable, Demir said, “We need to show this to the world. Our success in this area will change the perception in other areas as well. We should focus more on R&D and better market the products we demonstrate on the field. The capabilities of our products are not appreciated enough. We need to improve our local production capabilities and develop new cooperation and strategies on technology transfer with other countries. For the development of the sector, we should focus on not only selling and buying but contributing to the other countries' economies as well.”

Expressing that the gap between the defence import and export figures of our country has been closed, which is beneficial for our economy, Demir said that the most exported products of our country are parts of aircraft and helicopters, tanks, and other armored fighting vehicles. Prof. DEMİR also emphasized that certain products or subsystems of our country should be clearly demonstrated to be among the best of the best in the world. “The arms industry must have a marketing strategy of its own. It is necessary to discuss how to transfer technology in countries where we consider potential markets. We need to identify one or two topics on technology and R&D and focus on that area. In this respect, we need to focus on specific issues in our technology and R&D roadmap and find ways to be the best in these areas as the sector with a total mobilization. Together with the industry, we should put forward methods and strategies to find a place in markets with high potential such as Southeast Asia, Central and Latin America, and Africa.”

Latif Aral ALİŞ: “Between January and October 2019, Defence and Aerospace Industry exports increased by 37.5% with a total of US$2,136 million,  compared to the same period of the previous year”

In his speech, Chairman of SSI Latif Aral ALİŞ drew attention to the fact that the defence industry achieved the most significant increase rate among the 28 sectors in our country. Emphasizing that Turkey's exports increased 10.5% in the last six years while the defence industry exports increased by 61.3%, Latif Aral ALİŞ said, “Between January and October this year, our exports have increased by 37.5% and reached US$2,136 million. We are the leading sector with this increased rate. In the last 12 months, we have earned US$2,690 million from exports. While Turkey's exports per kg were US$1.32, our exports per kg in the defence and aerospace industry has reached US$ 46.59. This is almost 50 times the average of Turkey. In other words, the return on investment in the defence and aerospace industry to our economy has been 50 times higher than in other sectors. These figures show that our export union, SSI, produces value, and the world accepts this value. Therefore, the continuation of investments in this area without slowing down is very valuable for the development of our economy. Our success also has a multiplier effect on other sectors.” Underlining that the value added to the national economy by defence industry exports is incomparably superior to the other sectors, ALİŞ continued his words as follows, “Turkey is open to physical and economic threats. Therefore, the defence industry has significant importance for the defence of our country. Especially in the last ten years, our defence industry has made considerable advancement, both economically and technologically. Our President's support for the sector also brought the defence industry to a prominent position. As private and public sectors, we have to synchronize and achieve greater success in the defence industry field. Manufacturing defence products is important but marketing them is even more critical. Therefore, designing domestic products and being competitive and reliable stands out as important factors.”

Underlining the importance of transferring the skills acquired in the defence industry to the civilian sector, Chairman of the OSTIM Board of Directors, Orhan AYDIN stated, “The skills learned in the defence industry should also be transferred to the civilian sector. We see that there is more potential in civil aviation. I believe that we can achieve the US$10 billion export target for 2023 in civil aviation. We don't have a strategy yet to grow the small companies that can increase exports and reach the US$10 billion target. To achieve this, large defence industry companies should support small companies. Meeting the National Certification Center need will pave the way for exports, and we know that SSB is currently working on this subject.”

Aselsan Vice President Osman Devrim FİDANCI said, “We exceed the target of US$320 million in exports, and we expect an export surplus of 50% compared to the previous year. Aselsan has investments in 10 different regions of the world and has customers from 65 different countries. Our Ukraine and Pakistan offices will start their activities in 2020. While the certification and training budget of the Aselsan marketing and business development team for 2019 was US$34 thousand dollars, we will continue this training by increasing the budget in 2020.”

According to the SWOT analysis in the Defence and Aviation Industry International Cooperation and Export Current Analysis Report, product features and quality, customer focus and flexibility in solutions, and knowledge and experience are the top three strengths of the Turkish Defence and Aviation Industry. On the other hand, the weaknesses include issues such as international relations, organizational deficiencies in the number of units and staff, and lack of credit mechanisms. While positive international relations, improvement of brand value and perception of Turkey, and the SSB's support and strategies are considered as opportunities in the report, foreign policy, licensing, embargoes and sanctions are noted to be threats.

Stating that identifying new technological areas that may create opportunities for export and prioritizing these areas for export incentives have strategic importance, the report considers cybersecurity as an area with high growth potential. The report also states that 20 of the 27 companies contributing to the research have a sales approach to the civil sector, and the ratio of civilian sales to turnover is around 18%